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What is Grant Compliance, and Why is it Important?

Better application management of scholarships, grants, awards, and more.

What is Grant Compliance, and Why is it Important?

Grant compliance, or ensuring the funds are being used as intended, is crucial in being able to continue receiving funding for current and future programs. For many organizations, state and federal grants are just a fact of life. Keeping on top of the requirements and ensuring that your organization is meeting the goals of the grant requirements is key.

Many organizations have a dedicated department to make sure they meet compliance, while others have their grant management spread across several offices. Coordination between all involved parties ensures the collaborative approach is a successful way to meet grant compliance. No matter what approach you take, this grant compliance is crucial for any organization that relies on government funding.

What is Grant Compliance?

The process of ensuring your grant money is properly used and reported to the government is called grant compliance. Each type of program has its own standards, including rules and regulations that cover the handling of documentation, data reporting, impact, and progress. Whether or not you can meet the grant compliance requirements now impact your ability to obtain funding in the future.

Why is Grant Compliance So Important?

One of the most important parts of grants management is grant compliance, and it’s important that grant professionals have some knowledge on the subject, even if you don’t add it to your portfolio. When following grant compliance guidelines, you ensure all policies are followed so your organization doesn’t lose its funding.

With limited funds available, each granting agency carefully selects organizations to award various grants. When you’re one of the organizations that are chosen, it’s crucial that you follow grant compliance. If you fail to follow these guidelines, you risk losing your current funding, as well as funding for future projects.

Who Needs to Follow Grant Compliance?

When it comes to issuing grants, those on both sides will need to follow grant compliance. In order for the grantor to continue receiving funds from the government that they can use to issue grants, they need to follow the rules set in place. For an organization to get a grant and continue using it, they have to meet the requirements set by the contract.

If you’ve received a grant, you should follow these steps to remain in good standing:

1. Know your requirements

While every grant does vary, you’ll need to know the following for every grant:

  • Contract terms and amount
  • Funding sources and applicable guidance
  • Scope of work
  • Key contacts for both the grantor and those handling grant management
  • Allowable vs. unallowable activities and costs
  • Reporting requirements

2. Regularly check the OMB Compliance Supplement


For anyone that receives federal grants, the Office of Management and Budget (OMB) Compliance Supplement is one of the most valuable resources for information on grant compliance for federal grants. This cost-effective tool is great if you need to understand procedures, objectives, and compliance requirements for federal programs. It also contains the audit objectives and suggested procedures that can determine compliance.

3. Avoid common pitfalls by knowing where your risks are

Ineffective grant management is the primary risk with grants. Some of the ways a grant can be poorly managed include:

  • Misrepresentation of grant results
  • Misuse of grant funds
  • Reputational damage from grant misuse
  • Loss of future funding
  • Violation of laws, regulations, or grant conditions
  • Failing to achieve the grant objectives

Keeping these risks in mind during the planning and grant compliance procedures is important, and they should be addressed with any teammates that are responsible for keeping things within the guidelines so you can meet the compliance requirements.

4. Avoid deficiencies with the right internal controls

Your auditor should have some controls in place to cover grant compliance, which may include:

  • Segregation of duties
  • Documentation of grant timelines and milestones
  • Approval and authorization
  • Program monitoring
  • Timely and accurate reconciliations of expenditures and related revenue, as well as financial reports, grant budget and adjustments, and grant cut requirements
  • Physical restrictions
  • Segregation of physical responsibilities and IT access

5. Regular review of the grant administration’s processes and procedures

The issues above can be avoided if you have a system established to keep track of all grant information. You should be able to answer the following questions:

  • Do we have adequate documentation?
  • What are the funding sources?
  • How many grants do we have?
  • Who manages each grant?
  • What are the grant requirements?

What are the Common Grant Types that Require Compliance?


There are a few common types of grants that have compliance requirements. These include:

  • Pass-Through Grants: These are federal grants that have to go through local government and are not directly administered via the federal government. There are compliance policies and requirements at the federal and sometimes state, levels.
  • Programs with Minor Applicants: These have to follow the guidelines of the Family Educational Rights and Privacy Act (FERPA), which is a federal law that protects certain student information. Any organization that receives FERPA funds must maintain FERPA compliance.
  • Programs Managed by Nonprofit Hospitals: Community benefits will need to be documented to maintain the tax-exempt status of the hospital, as well as comply with the Affordable Care Act.
  • Research Programs: Those that receive federal funding and are focused on manufacturing medical devices, pharmaceuticals, or medical supplies have to comply with the Physician Payments Sunshine Act. Any researchers that do work with human participants have additional requirements, like complying with the Institutional Review Boards.
  • Programs Managed by Banks and Financial Institutions: These organizations have to comply with and report to the Community Reinvestment Act, or CRA. Records that may need to be maintained include demographic and geographic information about the people you serve.

How does SmarterSelect help?

Ensuring that your organization meets the grant compliance requirements can seem like an overwhelming task, but it doesn’t have to be. When you choose SmarterSelect, we help by making grant management easy and efficient. SmarterSelect enables you to concentrate on your grant compliance efforts without having to worry about how to manage the grants. Reach out today to get started!


1. What is the importance of meeting the grant compliance requirements?

Whether or not you are meeting the grant compliance requirements now, impacts your ability to obtain funding in the future. Grantors are more likely to invest in organizations that have a track record of compliance, as it demonstrates their ability to effectively manage funds and achieve desired outcomes.

2. What are the common risks when it comes to grant compliance?

The common risks in grant compliance include financial mismanagement, inadequate reporting, failure to achieve objectives, insufficient documentation, lack of internal controls, non-compliance with legal frameworks, inadequate monitoring and evaluation, changes in grantor requirements, subrecipient non-compliance, and lack of compliance training and awareness.

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